Aramco moves on onshore infrastructure contracts

Saudi Aramco continued its efforts to upgrade fuel storage and distribution infrastructure in the west of the kingdom in early March, floating a tender for a major new fuel storage plant.

However, a flurry of such projects put out to bid around the middle of last year has suffered delay, as the lengthy hiatus between original conception and the move towards execution has induced substantial revisions to the projected scope.

Meanwhile, accelerating plans for the Aramco-led development of a multi-billion dollar maritime complex in the Eastern Province took a major step forward later in the month with bid submissions for the contract to construct the first phase of infrastructure.

Bids have been invited by Aramco for an estimated US$400 million engineering, procurement and construction (EPC) contract for a new tank farm for oil products at the port of Duba, on Tabuk’s Red Sea coast.

The contract entails the installation of storage tanks, loading and unloading facilities, pumps and associated facilities at a site close to the port’s existing bulk terminal and storage depot – which comprises a single berth with capacity for receipt and storage of gasoline and diesel.

Production of oil products in the west of the kingdom increased in 2015 with the commissioning of the 400,000 bpd YASREF refinery at Yanbu, and further expansion of the industrial city’s refining capacity is envisaged.

Aramco’s effort to upgrade the infrastructure for the supply of such products to the west’s growing cities – delayed somewhat by the revenue downturn from mid-2014 – appeared to take major steps forward during the second half of 2016 with the flotation of tenders for several midstream schemes. However, the majority of contracts have yet to be awarded.

EPC bids were submitted during the third quarter for a long-awaited project to build a 300,000 barrel bulk plant in the north-central Hail governorate storing gasoline and diesel for distribution to the remote inland region’s growing population. Contractors had initially been invited to express interest more than two years previously.

Offers had also been received during the second quarter for the contract to install a 220-km pipeline linking the Qassim depot to the south with Hail, to which fuel is currently transported by truck – with Tekfen reported to be the frontrunner.

Each package had been valued at around US$300 million but Aramco is expected to retender both contracts following changes to the scope. Bids remain under evaluation for an EPC contract also tendered during the third quarter covering a new bulk plant in North Jeddah.

However, plans to improve fuel supplies to the kingdom’s second city have made more progress than those for Hail – with Tekfen awarded in August the EPC contract for a new gasoline and diesel fuel pipeline linking the city with Yanbu further north.

Added incentive was provided by Aramco’s decision last year to close the ageing 78,000 bpd Jeddah refinery by early next decade rather than rehabilitate it.

By contrast, a four-year-old plan by Aramco to develop an estimated US$5 billion maritime complex at Ras al-Khair, on the east coast around 60 km north of Jubail, has moved forward swiftly since its revival in late 2015. Shareholder agreements have been signed between Aramco’s shipping affiliate Bahri, South Korean shipbuilding behemoth Hyundai Heavy Industries and UAE-based rig manufacturer Lamprell – most recently in the form of an MoU signed in early March for US engineering giant McDermott to move its regional fabrication base to the site.

In late March, after several deadline extensions, Aramco received bids for the first-phase infrastructure contract – estimated to be worth as much as US$1 billion and covering 35 mcm of dredging and reclamation work over three and a half years.

Among the companies shortlisted to bid were China Harbour Engineering, Belgium’s Dredging International, the local Huta with Archirodon of the Netherlands, Belgium’s Jan de Nul with the local El-Seif Engineering Contracting, China’s Sinohydro with Turkey’s STFA, the UAE’s National Marine Dredging Company, and Royal Boskalis Westminster and Van Oord, both of the Netherlands.

The state firm is responsible for constructing the basic infrastructure for the overall development – which will include a shipyard for large ships, facilities for the repair of large ships and offshore support vessels, and facilities for rig and platform manufacture. It awarded the five-month front-end engineering and design (FEED) contract in October to a team of the Netherlands’ Royal Haskoning and South Korea’s Hyundai Engineering & Construction.